Internet Radio Thriving, Putting Pressure On Other Music Formats

Over half of all internet users choose to listen to music using internet radio or on-demand music services these days. This is according to the “Music Acquisition Monitor,” a report from the NPD Group that tracks the use of Pandora and other music services.

That 50 percent of internet users equates to about 96 million people who flock to music services such as Pandora, Last.fm, Slacker Radio, YouTube, VEVO, Rhapsody and other services. The report finds that in the past three months 37 percent of U.S. Internet users listened to music on Internet radio services. A very close 36 percent of U.S. internet users listened to on-demand music services such as Spotify, MOG and Rdio to listen to music.

The audience for Internet radio is growing. NPD finds that internet radio grew 27 percent year over year. At the same time the on-demand music audience grew by 18 percent. While the audience for online music services has grown, other music formats have declined. The number of consumers reporting to listen to music on CDs has fallen 16 percent. The broadcast radio audience fell by 4 percent. Even music on digital formats including digital downloads has declined by 2 percent, NPD finds. Radio remains a dominant format for music listening, however online formats are closing the gap, quickly.

“Although AM/FM radio remains America’s favorite music-listening choice, the basket of internet radio and streaming services that are available today have, on the whole, replaced CDs for second place,” said Russ Crupnick, senior vice president of industry analysis at NPD. “We expect this pattern to continue, as consumers become more comfortable with ownership defined as a playlist, rather than as a physical CD or digital file.”

Online music services are taking a bigger share of airplay. NPD finds that since 2009 the percentage of Pandora users who also listened to AM/FM radio declined by 10 percentage points; the drop was 21 percentage points for those listening to CDs on a non-computer device; digital music files on portable music players dropped 21 percentage points.

“Part of these declines can be attributed to the fact that 34 percent of Pandora users are now listening to music on the service in their cars — either connecting through an in-car appliance, or listening via car-stereo-connected smartphones or other personal listening devices,” the report says.

Online music sources are a source for music discovery, and rediscovery.

“Consumers who listened to music on Pandora, VEVO, and YouTube also noted a significant positive effect in their overall discovery and rediscovery of music,” the report says. Roughly 64 percent of the internet radio and on-demand music service audience reported rediscovering older music, and 51 percent said they learned about new music.

“AM/FM radio has traditionally played a significant role in helping consumers learn about new music from well known artists, as well as finding new ones; however, Pandora and other music services are an increasingly important part of the music-discovery process,” concludes the report.